In the matter of University Co-operative Bookshop Limited (admins apptd) (No 2)

1. [1]

   GLEESON J: Application is made by the administrators of the University Co-operative Bookshop Limited (admins apptd) (Co-op) for directions pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations) (IPS), or alternatively, an order pursuant to s 447A(1) of the Corporations Act 2001 (Cth) in relation to a particular aspect of the administration of the Co-op.

2. [2]

   Messrs Carter, Walley and Scott were appointed as joint and several administrators of the Co-op pursuant to s 436A of the Corporations Act on 24 November 2019. Co-op is a co-operative. According to the affidavit evidence, it is registered in New South Wales.

3. [3]

   The issue which has arisen in the administration of Co-op is uncertainty as to whether the IPS and Insolvency Practice Rules (Corporations) 2016 (IPR) apply to an external administration of a co-operative registered in New South Wales. The reason for doubt is that, with effect from 2017, certain provisions of the Corporations Act and the Corporations Regulations 2001 (Cth), which were previously applied to co-operatives by the relevant legislation were repealed, and new provisions were introduced in the IPS and IPR, some of which at least, broadly correspond with the provisions that had been repealed and other provisions are new.

4. [4]

   The scheme of the legislation by which certain parts of the Corporations Act apply to co-operatives is as follows. Section s 4 of the Co-operatives (Adoption of National Law) Act 2012 (NSW), adopts the Co-operatives National Law (as set out in the Appendix to the NSW Co-operatives Act) (CNL) as a law of New South Wales. The CNL when read with Pt 3 of the Corporations (Ancillary Provisions) Act 2001 (NSW), applies certain parts of the Corporations Act to co-operatives, including (subject to certain modifications) Pt 5.3A and Div 3 of Pt 5.9: CNL, ss 13, 15 and 382. See Re Belmont Sportsmans’ Club Co-operative Ltd [2015] NSWSC 543 at [8] (Black J).

5. [5]

   On 17 December 2019, in addition to extending the time under s 439A(6) for convening the second meeting of creditors of the Co-op, Black J dealt with the administrators’ application for directions under s 90-15 or s 447A relief at a level of principle: Re University Co-operative Bookshop Limited (admins apptd) [2019] NSWSC 1898. It is convenient to reproduce his Honour’s reasoning at [4]-[7]:

6. [6]

   I agree with that analysis and the approach to the present application identified by Black J.

7. [7]

   Pursuant to liberty to apply granted by Black J on 17 December 2019, the administrators now seek directions and orders delineating those matters in respect of which a direction is sought under s 90-15 of the IPS and those matters in respect of which relief under s 447A is sought.

8. [8]

   The further application has been dealt with in chambers on the papers.

9. [9]

   In support of the application the solicitors for the administrators have prepared a schedule and tables identifying those provisions of the IPS and IPR that the administrators (a) submit are applicable in the administration of Co-op on the basis that they are re-enactments (with or without modifications) of former provisions of the Corporations Act or the Corporations Regulations; and (b) accept are new provisions of the IPS and IPR that are no comparable equivalent with the former provisions of the Corporations Act or the Corporations Regulations. After the Court raised a small number of queries with the administrators’ solicitors concerning some matters of detail in the tables, those solicitors provided updated draft directions and orders reflecting the administrators’ revised position.

Directions under s 90-15(1)

1. [10]

   Section 90-15(1) of the IPS provides that the Court may make such orders as it thinks in relation to the external administration of the company. That includes where a company is under administration: s 5-15(a), IPS. Among other things, a court can make an order determining any question arising in the external administration of the company: s 90-15(3)(a), IPS.

2. [11]

   An anterior question which arises is whether the power of the Court to give directions under s 90-15 of the IPS applies in the administration of a co-operative, such as the Co-op. That directs attention to the analysis of Black J extracted above at [5], as to whether s 90-15 of the IPS answers the description of a provision of Pt 5.3A which has been repealed and re-enacted by the IPS. The answer is yes.

3. [12]

   The provisions of the Corporations Act which were repealed, with effect from 2017, included s 447D which was contained in Pt 5.3A. Section 447D(1) relevantly provided that an administrator of a company under administration may apply to the Court for directions about a matter arising in connection with the performance or exercise of any of the administrator’s functions and powers.

4. [13]

   In Reidy, In the Matter of eChoice Limited (Admin Apptd) [2017] FCA 1582 Yates J at [27] proceeded on the basis that an application by an administrator for directions about a matter arising in connection with the performance or exercise of an administrator’s functions or powers would fall within the purview of the statutory power in s 90-15 to make an order that determines a question arising in the external administration of a company. His Honour applied the principles which have guided the Court’s jurisdiction under the former s 447D(1) of the Corporations Act referring in particular to the remarks of Goldberg J Re Ansett Australia limited and Korda (No 3) [2002] FCA 90; (2002) 115 FCR 409 at [65]-[66].

5. [14]

   In my view, Yates J was correct to proceed on this basis. Directions about a matter arising in connection with the performance or exercise of an administrator’s functions or powers would fall within the statutory power to make an order under s 90-15 of the IPS that determines a question arising in the external administration of a company. Accordingly, I proceed on the basis that the power to give directions under s 90-15 is applicable to the administration of the Co-0p.

6. [15]

   It is well established that the function of an administrator’s application for directions is to give the administrator advice as to the proper course of action to take in the administration. As Goldberg J explained in Re Ansett at [44]:

7. [16]

   Here the administrators seek a direction on a legal issue of substance or procedure. That is an appropriate subject matter on which directions may be given under s 90-15: Re Ansett at [65].

8. [17]

   I accept the administrators’ revised submission that the following provisions of the IPS and IPR are applicable in the administration of Co-op on the basis that they are re-enactments (with or without modifications) of former provisions of the Corporations Act or the Corporations Regulations:

   1. (1)

      (remuneration)

   2. (2)

      (lodgment and audit of administration returns) ss 70-5, 70-6, 70-15 and 70-25 of the IPS;

   3. (3)

      (meetings) Div 75 of the IPS, other than ss 75-20 to 75-40, and Div 75 of the IPR, other than rr 75-120 and 75-135 of the IPR;

   4. (4)

      (committees of inspection) s 80-35 of the IPS and rr 80-5(2) and (7) of the IPR; and

   5. (5)

      (review of external administration) ss 90-15 and 90-20 of the IPS.

9. [18]

   In Appendix A, I have elaborated the analysis which supports this conclusion, adopting the helpful revised comparative tables prepared by the administrators’ solicitors.

10. [19]

    A direction will be given under s 90-15 that the administrators are justified in proceeding on the basis that these provisions of the IPS and IPR are applicable in the administration of the Co-op

Relief under s 447A

1. [20]

   The powers of the Court under s 447A are wide but as the High Court has emphasised are not entirely without limit: Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270; [2000] HCA 30 at [20]. The High Court continued at [20] by observing:

2. [21]

   I accept the administrators’ submission that the IPS and IPR contain new provisions which do not have equivalence to the provisions in the Corporations Act or Corporations Regulations which have been repealed with effect from 2017. The new provisions in the IPS and IPR are as follows:

   1. (1)

      (statutory no profit rule) Subdivision E of Div 60 of the IPS and Div 60 of the IPR;

   2. (2)

      (funds handling) Div 65 of the IPS;

   3. (3)

      (information requests)

   4. (4)

      (committees of inspection) s 80-35 of the IPS, and rr 80-5(2) and (7) of the IPR;

   5. (5)

      (review of external administration) ss 90-15 and 90-20 of the IPS.

   6. (6)

      (directions by creditors) Div 85 of the IPS;

   7. (7)

      (inquiry by Court) ss 90-5, 90-10 and 90-21 of the IPS;

   8. (8)

      (review by registered liquidator) Subdivision C of Div 90 of the IPS and Div 90 of the IPR;

   9. (9)

      (removal of external administrator by creditors) Subdivision D of Div 90 of the IPS; and

   10. (10)

       (other matters) ss 100-5 and 100-6 of the IPS.

3. [22]

   An order under s 447A modifying the operation of Pt 5.3A in relation to the Co-op is appropriate given that Pt 5.3A generally applies to co-operatives. The modification will address the lacuna that exists in the administration of the Co-op insofar as the new provisions in the IPS and IPR do not otherwise apply to the administration.

Orders

1. [23]

   The Court gives the following direction and makes the following orders:

   1. (1)

      A direction under s 90-15 of the Insolvency Practice Schedule (Corporations) (IPS) set out in Sch 2 to the Corporations Act 2001 (Cth), that the plaintiffs are justified in proceeding on the basis that the following provisions of the IPS and Insolvency Practice Rules (Corporations) 2016 (Cth) (IPR) are applicable in the administration of University Co-operative Bookshop Limited (Administrators Appointed) ARBN 009 937 160 (Co-op).

   2. (2)

      An order under s 447A of the Corporations Act that Pt 5.3A of the Corporations Act is to operate in relation to the Co-op in such a way so as to apply the following provisions of the IPS and IPR in the administration of the Co-op:

   3. (3)

      Grant liberty to apply to the Corporations Judge in respect of any further directions or orders that the plaintiffs may be advised to seek in connection with the application of the IPS and IPR to the administration of the Co-op.